Client Concerns About Information Spillovers from Sharing Audit Partners
Journal of Accounting and Economics, Forthcoming.
55 Pages Posted: 27 Apr 2020 Last revised: 5 Aug 2021
Date Written: July 30, 2021
We hypothesize that companies in the same product market avoid sharing the same audit partner when they are concerned about possible information spillovers. Consistent with our hypothesis, we find that product market rivals are less likely to share the same partner when they perceive that information spillovers are more costly. While concerns about information spillovers significantly reduce the likelihood of product market rivals sharing the same audit partner, we find that such concerns do not deter them from sharing the same audit office. Lastly, when companies are unconcerned with information spillovers, our results suggest that partner sharing can be beneficial because it can result in lower audit fees and fewer accounting misstatements.
Keywords: information spillovers; audit partners; proprietary costs; product market rivals; audit fee; audit quality
JEL Classification: M41, M42, D82
Suggested Citation: Suggested Citation